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Unrealized Losses Trading and Available-for-Sale Securities

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1. Unruh Corp. began operations in 2007. An analysis of Unruh's equity securities portfolio acquired in 2007 shows the following totals at December 31, 2007 for trading and available-for-sale securities:

Trading Available-for-Sale
Securities Securities

Aggregate cost $90,000 $110,000

Aggregate fair value 65,000 95,000

What amount should Unruh report in its 2007 income statement for unrealized holding loss?

a. $40,000.
b. $10,000.
c. $15,000.
d. $25,000

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Solution Preview

The difference between the cost basis and the fair market value on trading securities is recorded on the income statement as an unrealized gain or loss. ...

Solution Summary

This solution discusses how unrealized losses on trading and available-for-sale securities are reported for financial reporting purposes.

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Journal entries for a portfolio of marketable securities: available for sale and trading

In Year 1, the firm purchased a portfolio of marketable securities for $1,000, which it holds as current assets. At the end of Year 1, the portfolio had a market value of $800. During Year 2, the firm sold some of the securities for $120 which had originally cost $100, but which had a market value of $90 at the end of Year 1. At the end of Year 2, the remaining securities had a market value of $1,150.

Required:

a. Assume the firm treats its holdings as available for sale.
1. Record the entry made at the end of Year 1.
2. Record the entries made during Year 2 and at the end of Year 2.

b. Assume the firm treats its holdings as trading securities.
1. Record the entry made at the end of Year 1.
2. Record the entries made during Year 2 and at the end of Year 2.

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